Recent research shows that entrepreneurship is taking on an increasingly important role in the strategic management process. Corporate growth and development, as well as the company’s ability to increase profitability over time, have increasingly relied on the entrepreneurship function for many a year (Jones & Butler, 1992). From the view of entrepreneurship, entrepreneurs notice opportunities, act and create new hierarchies or ventures to organize transactions. If successful, they reap the profit from their actions. However, if the entrepreneur happens to be the firm’s manager, when the management function is distinguished from the entrepreneurial function, agency problem arises in the new hierarchy.
For a large corporation, the situation of principals and agents would be obvious as the function of entrepreneurship has become separate from the management. Any entrepreneurial spirit of the manager or employee could conflict with his personal interest as the agent. Furthermore, with the imbalance of the reward system, the manager or employee could decide to develop the entrepreneurial idea outside the corporation for a higher return than the salary. It would be interesting to look into the factors that lead a manager or employee to explore the entrepreneurial opportunity within the corporation or outside it.
Furthermore, the characteristics of the manager and the moral consideration of the management could impact the manager on his decision-making process on how to explore the entrepreneurial opportunity. Shane (2003) suggested the non-psychological and psychological factors which affect the characteristics of the entrepreneur. The non-psychological factors include education, career experience, age, social position, opportunity cost and income level. The psychological factors cover aspects of personality and motives, core self-evaluation and cognitive characteristics.
The other consideration would be ethics. Studying ethics in entrepreneurial setting may offer more clarity regarding ethical issues, such as a potential explanation for the differences observed in the levels of cognitive moral development (CMD) between entrepreneurs and others. As per Solymossy and Masters, 2002, the individual level of cognitive moral development should influence ethical behaviors with higher levels of cognitive moral development should behave more ethically.
With the possible existence of conflict of interest in the principal-agent relationship, this paper sought to explore the feasibility of corporate entrepreneurship in a large corporation. By reviewing the literature and analyzing the results from the structured interviews, this paper sought the following:
1) To identify the existence of conflict of interest in the decision making process of how to develop the innovation concept.
2) To define the relationship between the likelihood of corporate entrepreneurship and the characteristics of the manager.
3) To draw the link between the likelihood of corporate entrepreneurship and the moral consideration of the manager.
4) To determine the likelihood of corporate entrepreneurship in large corporations.
This was an explanatory research design using a multiple case study method. A case study was an empirical inquiry that investigated a contemporary phenomenon within its real-life context, and that coped with the technically distinctive situation in which there would be many more variables of interest than data points and relied on multiple sources of evidence (Yin, 2003). Semi-structured interviews (Saunders, 2009) were conducted to the entrepreneur and managers of large corporations. To ensure validity and reliability of the measurement, the personal background and the executive profile were examined to reconcile the opinions of the respondents from the semi-structured interviews. The sampling logic of the unit of analysis (Yin, 2003) was based on the likelihood of the respondents to explore the innovative concept for their own interests. Data analysis was carried out based on the results of the semi-structured interviews to assess the existence and the degree of seriousness of using the innovative concept.
To review the relationships of the key issues and to develop the propositions of this study on the likelihood of corporate entrepreneurship in large corporations, the independent variables of the study were conflict of interest, characteristics of manager, and moral consideration, while the dependent variable was the likelihood of corporate entrepreneurship in large corporations. Propositions were set based on the relationship between the independent variables and the dependent variable.
In order to evaluate the existence of literal replications (Yin, 2003) of the developed theories, this research used three case studies. The key questions in the case studies were focused on the reasoning and the processes of each of the answer to the respective question. The comments on each case study were analyzed and utilized to update the case and the theory before conducting the next case study. In addition to the verbal comments obtained during the interviews, two other sources of evidence were carried out during the course of the case study for analysis purposes. They were direct observations and review of personal background by going through the personal executive profile.
In general, the results of the three cases support the proposition and literal replication (Yin, 2003) is expected. All of the three cases agree that the situation constitutes a conflict of interest. All the three cases agree on the existence of self-seeking motives of a manager in general and that the manager is likely to take the opportunity of acting against the interest of the company. People will favor personal interest of pursuing their own entrepreneurship by exploring the innovation concept themselves. This supported the arguments of the agency theory and the self-interest by Eisenhardt (1989).
Although not all of the factors, as shown by Shane (2003), were agreed by the three respondents, they still agreed with most of the measured factors in this research. Furthermore, all the three cases support that the characteristics of a manager are strongly associated with the decision-making process in terms of exploring the innovation concept. The three cases support the idea that a good education, a strong career experience, and a strong personality and motivations are strong factors to support entrepreneurship. In contrast, the three cases do not support the idea that a young age and a good economic environment are factors to support entrepreneurship. From the perspective of the individual factors (Shane, 2003), the three cases support two out of the three measured individual factors. From the perspective of psychological factors and environmental factors, the three cases support the measured factors.
With respect to Philippine culture, all of the three respondents mentioned that people in the country supported the decision of exploring the innovation concept to pursue their own entrepreneurship. This is in fact a strong support to the high socio-cultural environment as mentioned by Shane (2003). From the comments of the three cases, there is a social desirability of entrepreneurship in the Philippine culture. It would be a good area for further research on how to enhance and develop this culture for better economic growth of the country.
The three respondents agree that a moral issue exists and that the moral judgment of the manager is the key factor for moral consideration. Also, the three respondents agree that the innovation concept may be used for personal benefits, since it is a weak characteristic of the moral issue and there are weak situational characteristics for the moral judgment. In terms of the ethical decision-making model of Solymossy and Masters (2002), all of the three cases supported the general processes in the ethical decision-making model, namely; recognizing the moral issue, making moral judgments and engaging in moral behavior.
From the results, all the three cases support the idea that the innovation concept needs to be explored to pursue their own entrepreneurship. Furthermore, all of the three cases show the same consistent conclusions for the individual consideration of the conflict of interest, the characteristics of managers, and the moral issue, as well as the overall combined consideration of all the other issues. Although the three cases of this research cover the different expected likelihood of the respondents to explore the innovation concept for company use or for personal use, all respondents agreed to take the opportunity and explore the innovation concept for personal benefits. In other words, the likelihood of corporate entrepreneurship in large corporations is low. Manager will favor the development of individual entrepreneurship rather than sharing the innovation idea with the large corporations.
This is an important finding in the theory of corporate entrepreneurship. From a traditional approach, corporation entrepreneurship resulted in the promotion of innovation in large corporations. With the results of this study, promoting an innovation alone would not warrant corporate entrepreneurship in the large corporations, as the managers with the innovation concept could consider exploring it for themselves for their own interests.
The results of this study also claim that the managers would favor exploring the innovation concept for their own benefits and for their individual entrepreneurship. In other words, the likelihood of corporation entrepreneurship in a large corporation is low.
The large corporations need to reconsider their strategy in promoting corporate entrepreneurship in the company in order to maintain their competitive strength and to increase their profitability over time. If the large corporations still view that innovation is the important element to bring the company to be more competitive in the market and to enable the company to have opportunity to increase its returns in long run, the large corporations need to reposition their strategy in corporate entrepreneurship covering how to raise the level of innovation, and, how to encourage the employees to share their innovation concept, how to keep the employees to favor corporate entrepreneurship as compared to individual entrepreneurship.
From an individual’s perspective, this study confirms the likelihood of the managers to favor the use of the innovation concept for own entrepreneurship. This is an important way to encourage entrepreneurship in the country. Entrepreneurship could be one of the factors to secure economic growth, especially in the advanced technology world. Accordingly, one of the concerns for individual entrepreneurship in the Philippines is the start-up capital, as mentioned by some of the respondents. The government could consider some programs to assist those potential entrepreneurs to promote entrepreneurial spirit in the country.
The details of this research is available in the British Journal of Economic, Management & Trade, 2013-Volume 3 [Issue 4 (October-December)], Page 442-452.